Fining, naming, shaming

Last week the Productivity Commission released its much anticipated Final Report on consumer law enforcement and administration (Report), following a year-long review of Australia’s “single-law, multiple regulator” model.

Key findings

In its 245 page Report, the Productivity Commission finds that (not surprisingly):

Australia’s consumer protection framework remainscomplex (despite having a single Australian Consumer law);

the multiple-regulator model is operating reasonably effectively, given this intrinsic complexity; and

there is room for further improvement

Key recommendations

The Productivity Commission made numerous recommendations to improve and strengthen the ACL’s administration and enforcement. The key recommendations which are likely to have the biggest impact on businesses are:

Increasing penalties to $10 million

The ACL currently provides for maximum financial penalties of $1.1 million for companies (and $220,000 for individuals) for a single contravention, which the ACCC considers too low to be an effective deterrent.

ACCC chairman Rod Sims has long (and loudly) called for increasing penalties to “more than the cost of just doing business” in order to effectively deter offending conduct. The ACCC has been encouraged by comments made by the Court in recent cases such as its proceedings against Reckitt Benckiser for misleading claims about the so-called “targeted pain relief” of Nurofen products (read more here), in which the Court awarded $6 million in penalties on appeal (increased from $1.7 million). While this is the highest ACL penalty imposed to date for such conduct, the Court noted that this penalty was at the “bottom of the appropriate range” and the objective of any penalty must to ensure that Reckitt Benckiser “and other ‘would-be wrongdoers’ think twice”.

Opponents of increased penalties had submitted that the current penalty levels are a sufficient deterrent (but could be indexed for inflation) and that an increase is likely to result in disproportionate outcomes, particularly for small businesses.

The Productivity Commission has recommended (consistent with its draft recommendation) increasing the financial penalties to align the penalties for contravention of the competition law provisions of the Competition and Consumer Act. If adopted, the penalty for most ACL breaches would be the greater of:

$10 million;

three times the benefit gained from the breach; or

10% of annual turnover (if the benefit cannot be determined).

The maximum penalties for individuals would increase to $500,000 per contravention.

A national “name and shame” database?

The Productivity Commission concluded that the establishment of a national database of consumer complaints and product safety “incidents” to improve information sharing between regulators has merit and would enable better identification and analyse of consumer hazards. Further, making details of consumer complaints and potential safety incidents available to the public by means of a register should be further considered, having regard to the experience to date with the NSW Fair Trading consumer complaints register.

The Productivity Commission warns that making such data public should be done in a “careful and comprehensive way” not only to ensure usefulness, but to minimise unwarranted effects on business. However, it’s not yet clear:

if only “complaints” or all “incidents” would be published, even if these have been resolved have been resolved;

what minimum threshold will be set for recording a “complaint” or “incident”. The NSW Complaints Register lists businesses with at least 10 complaints lodged against them in one month

whether businesses will have an opportunity to respond or attempt to resolve a complaint or incident before it is recorded; or

where the information will be gathered from (e.g. hospital admissions, product warnings, business notifications and recalls), who will compile and vet it.

While a national database is broadly supported by the ACCC and consumer advocates, it was opposed by various business groups which have concerns about its adverse effects and likely effectiveness (having had experience with the NSW Complaints Register). In particular, there are major concerns that a “name and shame” register will disproportionately affect larger businesses, may not prevent unreasonable or vexatious complaints and will not take into account the type of seriousness of complaints. Questions also remain about how useful a register will be for consumers as information may be misunderstood, misrepresented and not give consumers anything new to help their decision making

ACCC as the national product safety regulator

The Productivity Commission, we think sensibly, recommends that state and territory regulators relinquish their powers to issue compulsory recalls and impose interim bans on unsafe products, to the ACCC. This would make the ACCC the central enforcer of the national product safety regime and help ensure a consistent (and arguably, more timely) response to product safety issues. This comes after major discrepancies in the various regulators’ approach to hoverboards which caused some house fires around Christmas 2016 – the Victorian regulator recalled certain products in early January while the ACCC issued an interim ban for the rest of Australia two months later. In this regard, the multiple-regulator model can pose serious issues for businesses with national distribution networks, and a single national regulator is likely to be a welcomed change.

Other changes

Other recommendations in the Productivity Commission’s Report include:

giving all regulators with the same “full suite” of enforcement tools;

improving transparency of regulators’ resourcing and performance through the development of consistent performance metrics and activities;

standardising electrical goods safety laws; and

enhancing consumer redress by establishing an independent review of the bodies that deliver ACL alternative dispute resolution services, including their powers and resourcing.

About The Author

Jessica WatersJessica Waters is a Senior Associate in the Competition Law and Regulatory Group at King & Wood Mallesons where she advises on a range of competition and regulatory issues.
Jessica is also an ad hoc sports journalist and her travels have led her to practice competition and EU law in London and Brussels, with fleeting stints in Canada and the USA.